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Pretend Primary: Income Inequality

The top one percent of all American earners now rake in fully 21 percent of all U.S. income, according to IRS data--the highest such concentration of wealth in the nation's recorded history. And the bottom half of all earners are taking in just under 13 percent of the nation's income--also a record low.

But with the presidential candidates focusing on Iowa and New Hampshire, they don't have a whole lot of opportunity to see or hear how the income gap is making life tougher in a place like the Washington region, where three of the nation's richest counties--Fairfax, Loudoun and Montgomery--struggle to maintain basic services in communities where folks with modest incomes simply can no longer afford to live.

If we had primary elections that mattered in this part of the country, income inequality would be near the top of the list of issues that voters would like to hear the candidates tackle. But of course our votes don't count because Maryland, Virginia and the District hold their primaries after nearly all the convention delegates have been chosen, which is why we're staging the Pretend Primary here on the big blog on Dec. 13. Every week until then, I'll introduce one of the issues that might dominate the discussion were the candidates ever to engage in this part of the country. Last week: illegal immigration. This week: income inequality. Next week: You tell me, by commenting below.

The growing and frightening gap in incomes has been a big issue on the presidential campaign trail for Democrat John Edwards, who continues to ring the populist bell as he did with his 2004 "Two Americas" theme. In Virginia, Sen. Jim Webb effectively used the income inequality issue to attract conservative Democrats and independents to his victorious campaign against then-Sen. George Allen. (Virginia's Democratic master strategist, Mudcat Saunders, who was one of the main brains behind Mark Warner's race for governor, also played an important role in bringing the inequality issue to the fore in the Webb campaign, and is playing a similar advisory role in Edwards' effort.)

President Bush says the income gap has been around for a long time and the only real solution is to improve our schools.

On the right, there are serious voices that say income inequality is good, that wealth belongs to those who create it, and that the only thing preventing poorer Americans from getting the health care and other services they need is a surplus of government regulation.

Most Republican candidates don't go quite that far--they don't want to sound callous, after all--but income inequality is not a big winner of an issue for them, so you don't find them saying much about it. Rudy Giuliani has gone perhaps the farthest among the GOP hopefuls toward accepting the Steve Forbesian 'let them eat cake' approach, embracing Forbes' flat tax notion as a cure for our economic divide. Of course, the flat tax would ease the tax burden on the very rich while shifting more of the bill to moderate income families. Mitt Romney has responded to questions about the relatively extreme wealth of those who run for president by volunteering that he would likely donate his salary to charity were he to win the White House. John McCain has talked about how income inequality is causing social unrest and economic problems in Latin America, but he hasn't quite extended that riff to this country.

There's empirical evidence that lower income families fare better economically under Democratic presidents (and conversely, the affluent do better under Republicans), but as they say on Wall Street, past performance doesn't guarantee future results.

Still, some Democrats like to rely on that reputation to make the case that they will deliver for those who are not finding this the most wonderful time of their lives. Hillary Clinton is talking a good deal about rebuilding the middle class and addressing some inequalities, and our man Achenbach took a stab at truth-squadding her rhetoric.

Barack Obama and Clinton both refer to the Gilded Age as the last time this country faced such a yawning space between rich and poor, and while Obama says most Americans don't resent the rich because we want to get there too, he adds that "they worry that the system may be rigged."

What, if anything, would you want to hear the candidates say about income inequality, and what else aren't they talking about that is of particular concern in this region?

By Marc Fisher |  November 8, 2007; 7:20 AM ET
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Comments

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Why dont you provide a break down by income level Marc - liberal leftists punk ? How much income does it take to be in the top 1%, the top 5% instead of just quoting stats. Or how much income does it take to be at the top of the bottom half. Your punk fat A*S is in the top 1% boy! People need to get off theirs and start working and getting an education. Immigrants do it all the time why cant you! Stop whining and use that energy to find a better job.

Posted by: Anonymous | November 8, 2007 9:33 AM

The same old, Democratic soak-the-rich bromide, class warfare rhetoric they have been using for 40 years. An excuse to raise taxes again. If she's so against inherited wealth, maybe she could start with the Kennedys, Kerry and Rockefeller. So wait for that and all the new roads the Dems promised in VA.

Posted by: Stick | November 8, 2007 9:34 AM

The only class warfare talk comes from the republicans and this year it's called "illegal immigration." In the 1950s it was the right to segregation. In the 1930s, it was anti-union. Not one Democrat favors class warfare, but the Republicans lead the discussion about immigration throughout Virignia races. the proof is in the pudding.

Posted by: Anonymous | November 8, 2007 9:43 AM

The only class warfare discussion is in the first two posts. They must feel very proud.

Posted by: Anonymous | November 8, 2007 9:45 AM

Can you provide any polling that this is an issue that actually matters to the voters? Economy may be up on the list, but the narrow issue of income inequality probably isn't.

Posted by: SB | November 8, 2007 9:47 AM

The comments above is reflective of why America is headed toward a South American style Oligarchy. Get ready because most of us will be the poor.

Posted by: Anonymous | November 8, 2007 10:03 AM

Some statistics for your consideration . . .

From 1986 to 2006 the top 5% of households saw mean incomes rise from $188,000 to $281,000 (a 49% increase). During that same time period the lower four quintiles saw incomes increase in a range of 8.6% to 14.5%. So, while one might argue that for the past two decades all income brackets have enjoyed a rising standard of living, the gap between the top and everyone else has grown significantly.

Posted by: Simon | November 8, 2007 10:06 AM

This is a huge issue. Our country was strongest when we had a strong middle class. People who earn the money should be able to keep it up to a certain point. I don't begrudge anyone who works hard and earns a good living. I do question whether a CEO adds enough utility to their company to make it worthwhile to pay them 300 times the amount the average line worker earns. I also don't have a lot of respect for anyone who sits at home waiting for a handout. If you work hard you should not have to struggle to make ends meet. That is simple fairness. This issue is not going away.

Posted by: DNB | November 8, 2007 10:07 AM

Marc,
Since you are probably in this top 1% why don't you just give up all the money you make past what is absolutely required to live off of and give it to charity. Of course your not going to do that.
Income inequality is dangerously close to communism and it is socialist. It is one of the most dangerous ideas to come out of the democratic/ liberal mindset in ages. The idea that the government should be able to tell people how much money they should be able to make, is downright scary.
Work hard, get a job and help yourself.

Or to quote Gordon Gecko:
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

Posted by: Jon | November 8, 2007 10:19 AM

Lets see communism failed and socialism hasnt worked out to well either! Why People are greedy. Redistributing income kills off the desire to succeed and to work ahrd. WHy should I if the govt is going to tkae care of me and cover my mistakes ie I bought more house than I could affordw/ a variable mortgage and I didnt read the fine print. Please oh please bail me out and save me from foreclosure Mr Govt man! Save me from my own stupidity. What about those people who are apying their mortgages on time and didnt buy too much house? Stop whining and start working harder. If a recent immigrant from West africa can reach the top 1% in a few years when she started with nothing so can your lazt a*S. Just get off it!

Posted by: Anonymous | November 8, 2007 10:29 AM

Whenever income issues come up, we can count on some readers making the remarkable assertion that news reporters are in the top 1 percent of earners in this country. It's very kind of you to put so much value on the work we do, but that's so wildly beyond what anyone here makes that the assertion deserves some response.
The Tax Foundation reports that the most recent IRS data shows that "To break into the top 1 percent, a tax return had to have an AGI of $364,657 or more." http://www.taxfoundation.org/publications/show/250.html

The 2006 Newspaper Industry Compensation Survey said the average entry-level salary for 521 dailies was $29,048, or 558.62 a week. News reports say the average reporter's salary at The Washington Post is about $80,000.

Posted by: Fisher | November 8, 2007 10:50 AM

From the National taxpayers Union
http://www.ntu.org/main/page.php?PageID=6

For Tax Year 2005

Percentiles Ranked by AGI -
AGI Threshold on Percentiles -
Percentage of Federal Personal Income Tax Paid

Top 1% - $364,657 -39.38%
Top 5% - $145,283 - 59.67%

It seems to me that those same high income individuals are paying more than their fair share of taxes.

Income is HIGHLY changeable. Someone who's 20 and working their first job making $10/hour will likely be making more than double that in 10 years. Also, the so-called high-income earners are statistically likely to be pre-retirement and will be earning drastically less in 10 years. This whole thread is intellectually dishonest at best, but more likely the ignorance of one with no background in simple economics, or outright class warfare by a liberal columnist.

Posted by: Leesburger | November 8, 2007 11:18 AM

I do not claim to have an answer to our country's economic divide, but here's what I know: I am making more money now than I ever have and I somehow have less to spend AND save. I have no credit card debt and am not frivilous with money, do not spend too much on my home or car or manicures or rider lawn mowers or any type of unnecessary items yet I still have difficulty making ends meet - as in I sometimes don't have money for groceries after I pay the bills. I did not have these problems the last time a Democrat was in the White House and I was making $30K less than I do today when Bill Clinton left office.

There are many other reasons why I will be voting blue next year but even if there weren't, based on my own experience, I believe Democrats are the ones who are at least acknowledging the pain I (and many others) feel in the pocketbook- and are, therefore, the best equipped to ease it.

Posted by: Anonymous | November 8, 2007 11:24 AM

I think the first place to start is the simplification of out tax code. It's wrong for taxpayers to have to hire someone to do their taxes in order to keep from overpaying, but that is precisely where we stand. Our tax code is so complicated, that unless the average citizen has access to a professional tax preparer, it's very likely that he or she will end up paying more than required because they are unaware of, and therefore unable to take advantage of various tax shelters, loopholes, deductions, and the like. In addition, the average American is not in a position to take advantage of the offshore tax shelters and so forth that are readily available to the wealthy. This is especially true for those who are self employed or independent contractors. So please excuse me if I don't shed any tears over the "plight" of the wealthy because the tax tables say they have to pay a higher percentage of their income in taxes. In spite of what these people who are always screaming "communism" think, once you account for all of their built in advantages, wealthy people, on average, actually pay a LOWER tax rate than the average American. That's a fact.

Posted by: Me | November 8, 2007 11:30 AM

A prominent local attorney felt relieved when he got a plumber to come fix a broken pipe in his home on a Sunday ... until he was handed the bill.

"FIVE HUNDRED DOLLARS ??!! You were only here half-an-hour. That's a thousand bucks an hour. I'm a LAWYER, and I only charge $400 an hour !"

To which the plumber replied, "Yeah, that's about what I got when I was a lawyer."

Posted by: gitarre | November 8, 2007 11:31 AM

Riiiiiiigggggghhhhhhht Marc. Sure. You make close to 80K a year. HAHAHAHAHAHAHAHAHA

Don't make me laugh over here.

I will give you that you may not be in the top 1% but I have NO DOUBT you are in the top 5%.

Quote from the link above:
Including all tax returns that had a positive AGI, those taxpayers with an AGI of $145,283 or more in 2005 constituted the nation's top 5 percent of earners. To break into the top 1 percent, a tax return had to have an AGI of $364,657 or more.


My Dad came to this country with $100 in his pocket. He worked his butt off to provide for his family. He only wanted better for his kids so taught them to work hard and get ahead. Now I have my own business and my brother is a doctor. We are both in the top 5%. What is wrong with that? I remember sacrificing A LOT. Getting picked on all the time in school for being a nerd and studying a lot. Now those same idiots that were "cool" and didn't worry about math and reading now want handouts? In this country there is NO QUESTION if you go to school, work hard and get an education you can live a good life.

I believe in helping people get that education but giving them a handout to raise their income? I think not.

Posted by: SS | November 8, 2007 11:37 AM

So at what point do you make too much money, and how on earth do you justify telling someone how much is enough for them to live on. Besides being basically theft, there is no point. You have to fall back on the good nature of the human spirit, like the gates foundation. But if someone who has worked their ass off wants to buy a 300 Million dollar yacht, its their right as an American to do so. Even if that money could do wonders for the inner city. This is a horribly slippery slope that the US can not afford to even consider.

Posted by: Jon | November 8, 2007 11:38 AM

to the commenter above: the bailout in the subprime mortgage crisis right now is focused on protecting lending institutions, not individual homebuyers. these institutions made poor investments in the name of profit and they are the ones being bailed out, not individual homebuyers. in many cases they took advantage of unsavvy individuals who simply wanted to get into what is probably the biggest means of wealth creation for americans: homeownership. for the record, those who are now -- and were always -- most interested in the problems of income inequality were fighting to prevent risky subprime lending long ago, but to no avail. everyone was getting rich, so nobody cared. but now that the collapse of the subprime lending market is affecting wall street investors and corporate interests -- and not just poor people -- people are concerned and the government is intervening.

it would be nice if it was true that wealth was only dependent on working hard. but anyone who believes that is deluding themselves. deregulation with the aim of letting the rich get richer is shortsighted and immoral.

Posted by: chris | November 8, 2007 11:39 AM

All of you anti-tax morons are the reason we are on our way to becoming a 3rd World country. I remember a few months ago the NYT identified a few of the top 1 percenters and found that most of them still have to work for a living. That means the statistics will be even more staggering if you look at the top 0.5% or 0.1%. Does it really make you a communist to say that maybe the top 0.1% of the country could shoulder more of the tax burden? And it is a perfectly legitimate and obvious question to ask why the richest counties in the area cannot seem to fund basic services. Oh yeah, I forgot it's because they're overrun by illegal immigrants.

Go drag your knuckles back to your rocks and crawl under them.

Posted by: Payne | November 8, 2007 11:39 AM

Couple other comments:

1.) Despite what the Fed says, the real rate of inflation the last few years has been much higher do to rising cost of fuel and other resources. The Fed uses a cooked inflation number that isn't very accurate. Chances are very strong that a person's salaray in the US is not keeping pace with the true inflation rate.

2.) Me touches on it, but there is a huge difference between income and wealth. The Kennnedy clan, Bushes, Rockefellers et. al. don't pay hardly anything in income tax, because they don't really make any personal income. The government taxes income, not wealth.

3.) The people in the top 1% aren't wealthy enough to shelter their fleeting high income effectively. Most of these people are small business owners or other individuals who have one or two years of high income, and then their bracket changes.

4.) The tax code does NOTHING to encourage saving or investing. Consequently, American individuals are almost as indebted as our government. We owe .75 Trillion (with a T) in non-mortgage bank debt (credit cards). This is the REAL threat to our economy, not a few sub-prime mortgages.

Posted by: Leesburger | November 8, 2007 11:43 AM

Simon's comment above shows why this issue doesn't get traction. If inequality was increasing in such a way that the lives of the poor were getting worse, then it could be a live issue. But that's not happening; rather, everyone's income is rising, and so most people don't get that angry over the fact that some are rising faster than others.

Posted by: Tom T. | November 8, 2007 11:48 AM

Of course if presidential candidates had to win this region's votes, they would talk about DC voting rights--my suggestion for your topic next week.

Posted by: Shawn | November 8, 2007 11:51 AM

Income disparity, if not dealt with soon, will cause upheaval in this country. I'm a moderate Dem who is in the lower middle-class. The religious right, many of whom are in the working class, are learning that the Republican party used them. Professing to wanting to bring God into our lives, they really have wanted to bring (keep) money into the hands of the rich. I'm not expecting pitch-forks in the streets tomorrow, or for this to be an issue in '08, but this IS a problem and it must be rectified.

Posted by: Dropdead | November 8, 2007 11:53 AM

Topic Suggestion: Is Lou Dobbs on crack when he said that an Independent would win next November because the general population is sick of both the Dems and Repubs?

Posted by: greg | November 8, 2007 11:55 AM

Most families in this area with two people working and college education should be making at least 160,000 per year between them.

That would put you in the top 5% of households

For all this talk what are people actually proposing. Is it mainly to make the tax code more progressive???

For me its all about getting a college education and picking the right career field.

For 2008 graduates average engineering salaries are in the 50s business is in the 40s. Get an MBA and you are in six figures easy

There is no reason why an educated person should not be making at least six figures by the time they are 30 provided they have technical skills are work in a business enviroment.

For all you liberal arts majors out there you chose your career and you knew going on you would be making less.

Posted by: realitycheck | November 8, 2007 11:57 AM

Thanks for bringing this issue up though. That is truly shocking and saddening that the US has reached such dubious records.

Posted by: Shawn | November 8, 2007 12:02 PM

Hey Marc you are a columnists and blogger not a reporter. A real man would have posted his salary instead of doing a Hillary. Come on Marc you bloomin idiot you couldnt live were you do on your slary as a reporter. Your home is worth over a million dollars. The bambinos go to private schools and your lovely wife drives a GL Mercedes. My sources at the Post tell me you at the top of the pay scale along with Mikey and Mr Tony etc. So stop whining you make at least 10 times the average.

Posted by: Anonymous | November 8, 2007 12:03 PM

I'd just like to thank you for raising the income inequality issue at all. It is a HUGE issue that underlies a lot of the other problems in society -- health care, underfunded retirements, affordable housing, disparities in K-12 educational quality, et cetera. It deserves a LOT more ink (or electrons).

Posted by: Greenbelt Gal | November 8, 2007 12:03 PM

I never said you can't take them more. However when you start saying people should only be able to make X amount, and that they make too much so we should give some of that money to the poor, you basically start sounding like a commie, or at least a very very hardcore socialist. You want additional programs to help the poorer get additional wealth if they earn it, great. But no handouts, and it should be done based on need, not race. A poor white man in Mississippi has ever bit the right to lift himself out of poverty as a black woman in NYC.

Posted by: Jon | November 8, 2007 12:07 PM

There is a lot of a name calling and hubris in the responses to Mr. Fisher's column, which, unfortunately, is typical of most debates in our society.

The bottom line is that America is an incredibly rich AND a wasteful country -- that is beyond dispute. Maybe we need to think about the underlying issue here -- how well do we Americans treat each other as human beings? Based upon the reactions to Mr. Fisher's column, not very well at all, I'm afraid.

As a nation we need to get back to our moral foundations and begin to take seriously the notion that the citizens of a strong, principled nation take care of each other. It matters not what one's religious persuasion is, if a nation's citizens stop caring for one another, that nation is bound to fall. I believe that America is has reached that point.

Posted by: p41 | November 8, 2007 12:27 PM

I say let the Republicans keep going with the arrogance. They can keep preaching about how income disparity is not a problem in the US and the dems can continue to pick up votes in the vast middle part of the country.

Try to tell any laid off factory worker in the Midwest, who is applying for a job at Wal-Mart that income disparity isn't a problem. His job was just shipped off to China and the owner of his company gets a $120 million bonus while he slips on his mortgage payment and falls into collection. Its happening to thousands of Americans every day. Even Exxon and Chevron who have record profits are outsourcing American jobs to Central America and cutting back US pension plans.

Do I believe in higher taxes on individuals? Not really. But when corporations move offshore and outsource our jobs while they make record profits they should get taxed at the highest rate possible.

Republican corporate tax policy (not personal tax) is why they lost all the hard working blue collar voters in Illinois and they will continue to lose voters until they are left with just the top 5%.

Income disparity creates socialism and communism so why not fix it before we get to that point. Although its hard to argue against Socialism and Communism as Europe and China continue to grow at a much faster rate than the US.

Posted by: Southeasterner | November 8, 2007 12:56 PM

Wait this article is from Fisher?

The same guy who so strongly promotes building a $400+ million stadium 100% supported by DC taxpayers for millionaire baseball players?

Are you serious? Marc its amazing how many contradictions you are full of.

Posted by: Boreball | November 8, 2007 1:03 PM

P41 is very wise. Those at the top of the economic ladder should realize the good in giving back to their communities. Is it right that many at the top are taxed at a lower rate than those in the middle ?

Posted by: Falmouth | November 8, 2007 1:04 PM

I was really surprised to see someone write that two people with college degrees should be making $160k. The only couple I know making money like that are a lawyer and a doctor. I know many couples with advanced degrees stuck at $65k-75k each. It is not uncommon for even a PhD to make $75k. That is good money, sure, but it's a far reach from $160k or more per couple.

I have a friend who is a nice person, but when he did profit sharing for his company, he gave himself 50%, his investors 40% and 40 employees a split of 10%. And when one division stopped earning money, did he keep paying their salary at the expense of the company? No, he laid them off without severance, so don't act like he's got to pay salaries through good times and bad, companies stopped taking those risks.

I'm not saying what he did was evil or wrong, but I think it explains part of the income disparity- entrepreneurs taking risks with other people's money and not splitting the proceeds with the people doing the work.

Posted by: DCer | November 8, 2007 1:38 PM

I agree with Marc that income disparity is of grave concern to the health of our nation. We will not continue to prosper with a widening gap between rich and poor. I work for a Wall Street firm and am deeply troubled by the rise in homelessness and poverty. We have to take care of those less fortunate particularly kids and the elderly. It is immoral to continue to let the rich keep more of their income. I am afraid there is no other choice but to raise taxes on the wealthy. The markets are not doing a very good job of wealth distribution.

Posted by: FCPS resident | November 8, 2007 1:59 PM

I believe in hard work and education as a means to move ahead, but income disparity is not an issue of who works hardest. I'm in the top 5%, and I work hard enough, but I don't work as hard as most folks in the service industry. Education is probably the most effective tool for achieving a change in income, but if your parents aren't well-to-do, your schools probably aren't the best and going to college sure isn't a given. Just learning the ropes on getting into college and finding the money to go for first generation folks is intimidating - I know as I have been there. My point is second to education and maybe ahead of education as a key for overcoming income disparity is EXPOSURE to things that you don't naturally stumble across when you aren't well-to-do: financial management and options; loan acquisition so that you can be a savvy purchaser; college entrance and financing; credit acquisition and management, long-term strategy development, etc. Bottom line is income disparity isn't fixed by taking money from the rich and giving it to the poor - although the tax system favors the well-to-do in terms of percentage of tax paid, it's fixed by support of K-12 education - not just the sit-in-the-classroom kind, college for a broader community, financial management outreach, and other means. Stop making it seem like the well-to-do just need to pay more. They need to pay more attention.

Posted by: Pennyworth | November 8, 2007 2:00 PM

DCer you need to switch jobs then

Go work for anyone of the big consulting/defense companies around here. Within five years you will be making 80k easy.

Even as a government employee most people hit G-13 within five-ten years and with the locality boost that puts you at 80k as well.

Posted by: Reality Check | November 8, 2007 2:32 PM

These posters who object to the well-to-do being taxed more miss the point that the well-to-do have been keeping more and more of the money they earn due to the Bush/Republican tax cuts that were justified in the name of "fairness". These complainers forget that they have grown up and become successful because of what the country was like when they grew up, when the tax rates were so "unfair". Now that they are well off they want to change the rules and push the burden onto the middle class. Sounds like a bunch of ungrateful people to me.

Posted by: Anonymous | November 8, 2007 2:34 PM

If any of you think that outsourcing, trade defecit, et. al. and income inequality are going to change under a Dem administration you're out of your minds, collectively and individually. These are global conditions and affect the other industrialized countries as well. Worried about the trade defecit and the falling dollar. Start buying American. And pay cash.

Posted by: ronjaboy | November 8, 2007 2:41 PM

To the 3rd poster; the proper phraseology is "the proof OF the pudding IS IN THE EATING".

And "begs the question" is not equivalent ot or the same as "raises the question". You didn'tt say that but others do.

Posted by: Stick | November 8, 2007 3:02 PM

DCer you need to switch jobs then

Go work for anyone of the big consulting/defense companies around here. Within five years you will be making 80k easy.

Even as a government employee most people hit G-13 within five-ten years and with the locality boost that puts you at 80k as well.
------------

You are 100% correct. I did not mean to suggest that *I* wasn't making $80k, but that I knew no couples where both were.

Posted by: DCer | November 8, 2007 3:06 PM

In your chat today, you commended the bank employee for reporting the DC tax criminal's attempt to cash a $410,000 check. Are you aware that by law bank tellers must report large cash transactions that are out of the norm? When I was a teller 20 years ago, any cash transactions (deposits, withdrawals, or check cashing) above $10,000 had to be reported. I had a gas station that once deposited $50,000 when their weekly norm was about $8,000. I started completing the required paperwork with them when the bank vice president overruled me and deemed the $50,000 an amount within their normal business. About 6 months later, all bank employees were interviewed by Treasury officials. The gas station owners for later convicted of money laundering (and our bank officials were warned for not complying with the $10,000 limit).

Posted by: dcbanker | November 8, 2007 4:36 PM

A few solutions:

Forget the so-called Fair Tax (the all-sales tax that hurts low-income households the most, because the poorer you are, the higher proportion of your income you spend). We need a vastly simplified tax code, with no loopholes or shelters or mortgage interest deductions and three or four marginal tax rates which should be much higher at the top than they currently are.

Increase federal spending on education. Period. No Child Left Behind is a harsh all-carrot-no-stick approach. What we really need are higher teacher-to-student ratios in every school, at every level. Children should not have to depend on the value of their parents' houses for a quality education.

Smart-growth policies at the national level. Housing affordability is our biggest nightmare in this part of the country (at least it's my biggest nightmare), and a big part of the blame goes to jurisdictions that try to zone out higher-density, more affordable housing (partly to keep their tax bases up to afford higher school spending, see above). The federal government can't get into zoning decisions, but it can refuse to extend highway and other federally-funded infrastructure to low-density sprawl zones. Increased federal spending on education would also help with this problem.

Cut tax breaks for employers who move jobs overseas, and use the increased revenue to fund education. Classical economic trade theory says that international trade is good for the economy as a whole, and while some workers lose their jobs, the winners from trade can more than compensate them for that loss. Fine, but you actually have to compensate those workers. Other industrialized countries have high-quality free retraining programs for outsourced workers, that allow laid-off factory workers to retrain as nurses, for example, without having to take on onerous student debt loads. Maybe if nursing education were less expensive, we wouldn't have to import nurses from other countries where education is free. It would be nice in general if students didn't have to take out small mortgages to get a college education.

Posted by: csdiego | November 8, 2007 6:15 PM

In the third graph of my post above, make that all-stick-no-carrot.

Posted by: csdiego | November 8, 2007 6:18 PM

The tax code should promote growth, innovation, market liquidity and efficiency, and reducing extreme wealth inequality if there exists one.
Here, please note that I do not use income inequality. I believe raising income tax will not reduce extreme wealth inequality simply because the rich ones are typically asset-rich, not necessarily income-rich. Income does not count much to the wealth of the asset-rich. Higher income tax makes sure that the hard-working-income-riches cannot catch up with the asset-riches.
This system is rigged against the hard-working income-riches to protect the asset riches who live off a big inheritance. This leads us to look at the current capital gain tax code.

Currently, short term capital gains are taxed every year and at a much higher rate than the long term gains. Long term gains are taxed once only if the asset is sold.
This favorable treatment for long term gain forces capitals to be tied up with old companies. It deters the flow of capital to new innovative ideas and hence new growth areas, decreases market liquidity and increases market inefficiency.
On the other hand, the short term investors provide liquidity, increase market efficiency, provide capitals to support new innovative companies. But the short term investors heavily penalized by the short term gain tax.
Long term investors pay tax only once over many years, while short term investors pay tax every year and at a much higher rate.

Therefore, I would like to suggest that the long term gain and short term gains should be treated equally. Since short term gains is taxed every year, the tax rate for short term gains should be lower than that of long term gains. This will promote innovation and new growth areas, increase market liquidity and efficiency, encourage hard-working people and reduce wealth inequality.

Posted by: Fan | November 8, 2007 9:51 PM

ALLEN - Come back!!!

Posted by: Anonymous | November 9, 2007 2:25 AM

I think our current tax system assumes that those who make more should contribute more; and that seems fair. It can be discouraging to jump from one tax bracket to another and feel like the return on effort is dimishing. It can also be discouraging to work two (or more) jobs and barely scrape by. Even if one sees a way out through education or industriousnes, it's a tough row to hoe in real life.

The current tax-code while imperfect does attempt to mitigate an uneven playing field:

1. Progressive Tax Brackets already exist. I guess the candidates could lead a conversation about how they might be adjusted for good or ill.

2. There are Personal Exemptions for necessary expenditures. This is the amount of everyone's income that is not taxed. Again, we could discuss what is a proper personal exemption. Most of us, even those who claim to live frugrally, don't live at a subsistance level. e.g. how much is cable, nowadays?

3. There are Deductions to encourage desirable behavior such as owning a home and having children, paying for health-care, and giving to charity. For those who make very little, there's also the Earned Income Credit which can even "refund" taxes not paid. Yes, it's a wealth transfer.

4. There are tax deferrals for retirment savings in 401Ks or IRAs.

The candidates do talk about the struggles of everday working people, and try to tie that into issues like health-care, social security, education, etc. So I guess the issue of unequal income is being addressed if obliquely.

It seems to me that the government is already doing what it can to address income inequality through taxation and social programs. Other than minor adjustments, I'm not sure more is necessary or possible.

On the poor side I do think the church can do more to address the issue. My impression is that as income increases (and taxation progresses), most people do not increase the proportion of their giving. Doing so would empower the church to finance more quality social programs presumably with more heart than those run by the government.

On the rich side, I sometimes wonder why CEOs are paid so much more than line-workers. CEO salaries must be approved by the board of directors who are elected by the share-holders. It's not completely out of control of the general public. Occassionally I see an article in the financial press calling for smaller CEO salaries; but I don't see a movement. If enough people felt strongly about it, I would think that a concerted effort could be made, even if it took several years.

So if there are barriers to faith-based social programs or share-holder motions to reduce CEO salaries then candidates could also talk about how to remove those.

It's been useful writing my response. It's a little more challenging to come up with solutions than to criticize someone else who has already made the attempt - or not.

Posted by: JonnyB | November 9, 2007 9:34 PM

If you have a 4 year degree and have 10 years of experience, and are not making $80K in the DC area, then you're probably not very smart.

I don't have a solution for that. Dumb is not curable.

But most couples who have an IQ higher than room temperature are making more than $150K combined. The government wants you to think that's a lot so they can take more. After all, you're "wealthy".

You don't deserve any of my money. You didn't do anything to help me earn it in the first place.

Posted by: ShakihngMyHead | November 10, 2007 9:56 PM

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